Electric cars

Really powerful

Electric!

I drove an electric car last week. It was a Reva, an electric vehicle manufactured in India. The Department of Energy is currently testing the car on Bhutanese conditions.

The Reva is small. In fact, it’s not much bigger than a golf cart. So it can fit only two adults – that’s the driver and one passenger. The car actually has rear seats, where you can squeeze two little children. But if you do, you won’t be able to find space for even small luggage. Only this, and yet the car costs Nu 450,000 without taxes.

Theoretically, the Reva can run for 80 kilometers on a complete charge. So that means it is good only for local transport. A fully charged battery couldn’t take you to Paro and back. And you can forget about traveling to Punakha.

But there’s good news. The Reva emits zero emissions. So it would be good for Thimphu and our environment. It would also be very good for Bhutan’s image.

And there’s more good news. The Reva is cheap. Very cheap. It takes nine units of electricity to completely charge its battery. At Nu 1.40 per unit (that’s the price of electricity at the highest slab) that works out to Nu 12.60. A fully charged battery can take you for 80 km, so each km would cost Nu 0.1575 in electricity.

Now consider a small petrol car. That would give you about 15 km per liter. A liter today costs Nu 38.53. So a kilometer traveled would cost Nu 2.5687. Say you travel an average of 30 km per day. That’s 900 km a month. That would cost you Nu 2,311.83 on the petrol car. But only Nu 141.75 on the Reva!

That’s a huge difference. And the difference gets much bigger if you compare the Reva with larger internal combustion vehicles or if you are required to travel more each day. Plus, electric vehicles require much less maintenance because they are lighter, and they have fewer moving parts.

If the electric vehicle catches on, the difference at the national level would be immense. We’d be able to substitute expensive imported fuel with clean hydropower which we can generate in abundance. And this positive trade-off would do wonders for our economy. That’s where we, as a nation, would really gain.

So our government should aggressively encourage electric vehicles. To do so, it should test more electric cars, including bigger ones from other countries; subsidize import duties and taxes on them; use them as pool vehicles; and grant preferential parking, especially in town.

But the first step is obvious: our ministers should drive them. Only then would others follow.

Corporate salaries – part 1

Two readers – Samdrups and Sharu – asked me for my views on our government’s recent announcement on corporate salaries. My views are simple. And they are straightforward. Government should not be involved in doing business. Yes, government should regulate businesses. But no, government should not interfere in how businesses are run. So our government’s decision to define the salaries of corporations – business entities, all of them – is wrong.

First, consider the Druk Holdings and Investment Limited. DHI was established by His Majesty the King as an autonomous organization in order to promote “…the competitiveness of Bhutan’s economy by transforming companies with government shareholding into highly efficient and productive companies that strive for excellence.” If DHI is to strive for efficiency, productivity and excellence, it goes without saying that they should have full authority over their HR policies. And that includes the salaries of their employees. The government cannot dictate salaries to DHI and expect them to become highly efficient or productive enterprises.

That’s why the Royal Charter of DHI (which outlines how DHI will function and which, incidentally, was revised to incorporate the submissions made by the government to His Majesty the King) clearly states that “the remuneration of the CEO and the employees of DHI shall be determined by the Board of Directors of DHI.” The DHI’s Board of Directors must do their job. Two of the seven-member Board of Directors are civil servants, purposely, to ensure that the government’s views are adequately represented in the organization. Any attempt by the government to encroach on the Board’s authority is illegal. And must be challenged.

Druk Air’s new route

high flying dragon

high flying dragon

A few times in past, incoming Druk Air flights have been diverted to Bagdogra due to unfavourable weather conditions over Paro. Such diversions are generally unwelcome by passengers and crew alike as they are required to spend hours in Bagdora waiting for the weather to improve in Paro.

Yesterday’s flight from Paro to Bagdogra was different. It was scheduled. And it was welcome. Bhutanese living in Phuentsoling and Samtse, and those who have work in Siliguri or Darjeeling will find Druk Air’s latest service to Bagdogra very useful. And as the only air service allowed to use Bagdogra as an international airport, Druk Air’s flights to and from Bagdogra will prove very beneficial to Indians living in the northern part of West Bengal and Sikkim.

Yeshey Dorji’s photograph of Druk Air flying above the Paro Dzong is featured in the photo banner to celebrate Druk Air’s success. Well done, Druk Air. And thank you, Yeshey.

Good karma

Coffee, many say, is the most popular beverage on earth after water. Yet good coffee is hard to come by in most places. But it is available in Thimphu, at Karma’s Coffee, located in the Zhamling Building somewhere above Hotel Phuntsho Pelri.

Karma’s is owned and run by Karma Tenzin, Bhutan’s first barista, who spent about two years in Australia training to make good coffee. And he made a lot of it: about four to five hundred cups a day!

Back home the pace is much slower. He makes only 40 to 50 cups of coffee a day. This, he claims, allows him to pull the perfect shot of espresso each and every time, This also allows him to offer his customers a much wider choice of espresso-based drinks, from cappuccino to a range of lattes all brewed from the choicest Arabica beans.

Karma’s is open everyday, from 11 AM to 9 PM, and serves milk shakes, freshly squeezed fruit juices, tea, iced coffee, cakes, sandwiches, and great coffee, all in a cozy setting offering comfortable seats, cool music, and free wifi, where no one will bother you as if you fiddle your laptop or bury your head in a book.

Karma Tenzin is courageous. And he is a professional. I’m impressed.

Improving public services

Many businessmen and women would have been delighted to hear our government’s assurances to start the one-stop service centre during BCCI’s annual general meeting last Friday. And they would have been pleased to know that our government is already acting on these assurances. Because, yesterday, according to BBS, our prime minister met with government secretaries to consider ways of reducing the administrative burden.

Our government’s assurances and their immediate follow up came as especially good news to Dragyel Tenzin Dorjee. You see, Dragyel spent a year, running from pillar to post, to get permission to establish the Bhutan Institute of Media, a private institute offering courses in photography, journalism, graphics and design. He has his license now, but says that he wouldn’t wish his experience on any other person trying to start a business.

Connectivity for ICT businesses

In my last entry I celebrated the government’s promise to make Bhutan an attractive destination for ICT businesses. I am truly excited at the prospects of using ICT to strengthen our economy, create much needed jobs and generated revenue, all while safeguarding our brand-image as a country that’s serious about gross national happiness.

But yesterday I was reminded that our government will need to do a lot of work if ICT is to become a viable business in Bhutan. This is especially so if we want to attract foreign investment to spearhead the development of ICT businesses.

What happened yesterday? I couldn’t go online. And I’m still having trouble accessing international websites, including this blog.

So I called up Bhutan Telecom’s customer service (at 1700-1700) and learnt that, on the night of 3rd April, strong winds forced a tree on a BPC tower in Bunakha damaging both electrical and fibre optic cables. The electrical cables have already been restored, but it appears that it might take longer (3 to 4 days, I was told) to repair the fibre optic cables.

Though the storm at Bunakha has affected international uplinks to Hong Kong and London, Bhutan Telecom continues to provide about 10 Mbps link to Phuentsholing using their microwave link. But 10 Mbps is not enough to do the smallest of ICT businesses. In fact, even the 116 Mbps that Bhutan Telecom provides at full capacity will not be enough to develop an industry around ICT.

So our government should upgrade existing links and build alternate international links to make connectivity sufficiently reliable in our country. This should not be too difficult if the Universal Service Fund, which consists of license fees amounting to Nu 777 million each from Tashi Cell and B-Mobile, is used to finance these critical investments. The Fund, after all, was established to do just this sort of work.

Only after improving our connectivity infrastructure will investors – national and foreign – take our government’s promise to make Bhutan an attractive location to do ICT businesses seriously.

Otherwise get ready for more disruptions. See “Stayin online” for an earlier entry about unreliable internet services.

Attending to BCCI

The Bhutan Chamber of Commerce and Industry has just concluded its 24th Annual General Meeting. The gathering attracted some much needed attention for the private sector in general and the BCCI in particular.

The minister of economic affairs addressed the AGM during its opening ceremony on Thursday, and encouraged the private sector to come up with new business ideas.

On Friday, our prime minister also attended the meeting. And he spoke at length – for more than two hours, some say – to the business community about what the private sector can expect from our government. He reiterated our government’s promise to make Bhutan a preferred destination for ICT businesses. Yes! It’s about time that we started harvesting the enormous business and employment potential of ICT.

And he promised a one-stop service centre to make doing business easier. Yes! Our business community has heard this promise over and over again, first from previous governments and then, very compellingly, during the campaigning that preceded last year’s elections. And still no one-stop service centre. But now I’m very hopeful.

Kuensel’s article on the AGM is available here.

BCCI’s new leaders

On Thursday, during its 24th Annual General Meeting, the Bhutan Chamber of Commerce and Industries elected Topgyal Dorji as its 5th president, and Chen Chen Dorji and Thinley P. Dorji as vice presidents.

I offer my heartiest congratulations to the incoming president and vice presidents. The three unrelated Dorji’s have an important common mission: to force our government to get serious about private sector development.

Lazy banks

My last entry provoked Zekom to exclaim: “…calling Bhutanese Banks conservative is a praise they don’t deserve. I’d call them lazy!”

She is correct.

Because our banks our lazy, money lenders are doing a thriving business throughout rural Bhutan, where our farmers are compelled to take loans at exorbitant rates. It’s common for money lenders to charge farmers interest rates of 5% per month, which works out to 60% per year!

This, of course, is illegal. The Moveable and Immoveable Property Act (1999) stipulates that “… no lender other than a registered financial institution which has been duly licensed to engage in the extension of credit, may charge interest greater than 15 percent per annum expressed as a simple annual rate.” But the complete absence of meaningful banking services in rural Bhutan means that desperate farmers are willing to accept extremely high rates, even though they are illegal. It also means that our farmers find it very difficult to repay loans. And those that can’t lose their land and, sometimes, even their houses.

But that’s not all. I’ve learnt that money lenders do brisk business even in Thimphu. And how much do they charge? Get ready for this: as much as 20 percent a month! That works out to 240% a year.

This is ridiculous. And illegal. And heartbreaking.

Banking on our banks

Our banks continue to make generous profits. Last year, BNB made Nu 310 million, a whopping 124% over the previous year, and BOB made Nu 168 (see Kuensel article). Not bad, considering the size of our economy. And, considering that they’ve been consistently declaring very attractive dividends.

How do banks make money? Primarily by paying depositors a certain interest rate, and charging borrowers a higher interest rate. And obviously, the larger the spread between the two rates, the bigger the profit that banks earn. But what about bad loans, loans that banks cannot recover? That’s the risk that banks take, a risk that’s minimized by lending only to reliable borrowers.

So how do our banks consistently make so much money? By paying depositors low interest rates and charging borrowers interest rates that are much higher. And by requiring that all loans are secured by full collateral.

This is very good for our banks. But not so good for our economy. And definitely not good for people who want to do business.

That’s why doing business is difficult in Bhutan (see “Doing business isn’t easy anywhere”).

And that’s why the Doing Business Report ranks Bhutan a miserable 172 out of 181 countries in terms credit access. (see ranking)

Our banks need to be less conservative and a lot more active. They need to lower interest rates so that businesses have a better chance. Access to capital is limited to a few people who have collateral – and this is what deprives the vast majority of Bhutanese of business opportunities. The financial institutions must be more proactive in making it easier for farmers and small businesses to avail of loans – on the merit of their proposals and not collateral alone. The risk factor can be minimized if loan officers not only study and analyze the proposals, but also offer guidance and other support to the borrowers.

Improving access to credit will be good for businesses. And good for our economy. And that would be good for our banks: they’ll be able to make even more profits.